Highlights & Changes for 2018 Taxes
I want to talk to you about keeping records! Revenue Canada seems to have set its focus on reviews, request for information and audits. Letters from CRA come calling it different things but what it comes down to is if you don’t have the documentation to back up your claim they will decline all amounts. Keeping documentation is so very important. We think about keeping receipts in a business but personally most of us are a little less meticulous about receipts. Daycare, Medical expenses, investment consulting and Donations are among the items that CRA can review and disqualify the amount if there is not proper documentation.
As an added note to all my small business or self-employed people. CRA is also doing a lot more reviews. Number 1 most important fact: If you don’t have a log book they will absolutely disqualify all vehicle expense. Names on meal receipts or a journal or calendar where you have all appointments is as valuable as gold. If you would like some ideas on how to keep better track of your data give me a call at 905-244-0076. Other contact methods here.
Provincial
Low-income individuals and families tax (LIFT) credit
Ontarian’s will benefit from the Low-income individuals and families tax (LIFT) credit effective January 1, 2019, where a person who works full time at minimum wage (earning nearly $30,000) would pay no Ontario personal income tax. The Ontario government’s new Low-income Individuals and Families Tax (LIFT) credit is set to take effect on Tuesday.
According to the Progressive Conservative government, the LIFT credit will provide low-income and minimum-wage workers up to $850 and couples up to $1,700 in Ontario Personal Income Tax (PIT) relief.
With the LIFT credit, an individual working full-time, making minimum wage and earning nearly $30,000 would pay no Ontario PIT.
The tax credit would be gradually reduced for taxpayers with individual incomes greater than $30,000 and family incomes greater than $60,000, the government says.
Here is a link to Global News explaining the new credit.
Tax credits for Tuition, Education and Textbooks
This measure has received Royal Assent.
For the 2017 and subsequent taxation years, Budget 2017 proposes to extend eligibility for the tuition tax credit to fees paid for occupational skills courses offered at post-secondary educational institutions in Canada that are not at a post-secondary school level. The budget also proposes to extend eligibility for the scholarship and bursary exemption to students enrolled in such programs by amending the definitions of a qualifying student and a qualifying educational program.
Also as of January 1, 2017, both the federal education and textbook tax credits have been eliminated. However, the federal tuition tax credit still exists.
Unused education and textbook credit amounts may be claimed in 2018 as well as subsequent taxation years. If you are not able to use your education, tuition or textbook tax credits, you may wish to transfer them to your spouse, parent or grandparent, subject to certain restrictions.
Federal
Registered Disability Savings Plan (RDSP)
A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long term financial security of a person who is eligible for the disability tax credit (DTC).
Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included as income to the beneficiary when they are paid out of an RDSP. However, the Canada disability savings grant (grant), the Canada disability savings bond (bond), investment income earned in the plan, and the proceeds from rollovers are included in the beneficiary’s income for tax purposes when they are paid out of the RDSP. If your child is eligible for the disability tax credit, it is recommended that you:
- Create an RDSP to qualify for the Canada disability savings bond, which provides a maximum lifetime of amount $20,000 per child;
- Regularly add savings to an RDSP to qualify for the Canada disability savings grant, which offers families a maximum lifetime amount of $70,000 per child
DISABILITY TAX CREDIT (DTC) CERTIFICATION
As of March 22, 2017, nurse practitioners have been added to the list of medical practitioners who may certify eligibility of a person for the DTC.
Guide RC4064, Disability Related Information
CHILD-CARE EXPENSES
KEEP YOUR RECEIPTS. CRA Reviews of child care expenses are becoming more prominent and you can not claim without proper documentation.
If you pay for child care expenses so that you can go to work or school, you may be able to claim those expenses on your tax return. Each child for whom you claim expenses must meet the Canada Revenue Agency’s eligibility requirements.
The child must be younger than 16 years of age, be yours, your common-law partner’s or spouse’s child and be dependent on you, your spouse or partner. And, the child’s income cannot exceed $11,809.
According to the CRA disabled dependent children can be any age as long as they are dependent on you, your spouse, or partner. Claiming child care expenses may reduce the amount of tax you have to pay.
Eligible Child Care Expenses
* You can claim child care costs paid to daycare centers, day nursery schools, caregivers such as nannies, day camps, and overnight boarding schools and camps that provide lodging. To be eligible, day camps and day sports schools must have a primary purpose of providing child care.
* In Canada if you pay an individual person, such as a nanny or babysitter, you must provide their social insurance number. Note that the CRA requires proof of expenses in the form of receipts, and that you may be audited.
“Parents should take precautions when choosing a daycare or child care provider. One of these is to make sure ahead of time that proper receipts will be issued. Child care providers are required to issue receipts showing either their business number or social insurance number.
Ask for a receipt each month,” advises Robert Stone, a personal tax professional and founder of Mr. Taxes.ca, Inc. “It is better to ask ahead of time than to try to get receipts at the end of the year.”
Ineligible Expenses
* According to the Canada Revenue Agency payments made to relatives under the age of 18 years — such as your older children, or a niece or nephew — cannot be claimed. If your employer reimbursed any portion of your child care expenses, that portion cannot be claimed.
* Fees for swim lessons, Girl Scouts or other recreational programs are not eligible. Medical or hospital care expenses, clothing costs and transportation costs are all ineligible. If you are claiming fees paid to an educational institution, such as a boarding school or sports program, the cost of tuition is not deductible, but the lodging portion is.
* Child care provided by the child’s father or mother, your spouse or common-law partner also is not eligible.
BUSINESS EXPENSES
If you don’t have a log/mileage record CRA can deny any and all vehicle expenses.
Passenger Vehicle Expense Limitations
Income Tax Act s. 13(7)(g), s. 67.2, s. 67.3, Income Tax Regulations R7307(1), R7307(2), R7307(3)
The Income Tax Act imposes limits on amounts than can be written off regarding passenger vehicles. The prescribed amounts for passenger vehicles purchased or leased after 2000 (and unchanged for 2019) are:
In order to claim any deduction for business use of a motor vehicle you MUST HAVE A LOG BOOK OR APP (record) to track the business use of vehicle.
- Maximum deduction allowed for interest on a loan to purchase a passenger vehicle is $300 per month.
- Maximum deduction allowed for monthly lease costs per passenger vehicle is $800 plus GST or HST and any applicable PST, less any GST or HST input tax credits claimed. The deductible lease costs are prorated if the value of the vehicle exceeds the capital cost limit of $30,000.
- Maximum cost amount for capital cost allowance (CCA) purposes is $30,000 plus taxes less input tax credits. If you pay more than this, your CCA claim will still be based on only $30,000 plus taxes, less input tax credits.
